* IEA cuts forecast for 2009 oil demand by almost 1 mln bpd
* Russia-Ukraine gas dispute rumbles on, supplies still cut
* Bank of America, Merrill Lynch, Citigroup post huge losses
* U.S. inflation data due at 1330 GMT
(Updates throughout)
By Christopher Johnson
LONDON, Jan 16 (Reuters) - Oil slipped to around $35 a
barrel on Friday after the International Energy Agency cut
sharply its forecast for world oil demand this year and two of
the biggest U.S. banks reported massive losses.
The global financial crisis has forced many economies into
recession, reducing energy consumption and dragging down oil
prices by more than $110 since a record peak in July.
In its monthly oil report, the IEA revised down its estimate
for 2009 oil demand by 940,000 barrels per day (bpd) to 85.3
million bpd -- a fall of 500,000 bpd year-on-year. []
Bank of America <BAC.N>, which recently absorbed Merrill
Lynch, and Citigroup <C.N> both reported huge losses for their
fourth quarters on Friday, including billions of dollars of
writedowns from exposure to debt and real estate markets.
U.S. light crude for February delivery <CLc1> was down 29
cents at $35.11 a barrel by 1258 GMT, after hitting a low of
$34.77. The contract, which expires on Tuesday, touched a low of
$33.20 on Thursday, the weakest in nearly a month.
London Brent crude for March <LCOc1> was down 13 cents at
$47.55, maintaining an unusual premium to the U.S. benchmark due
to growing U.S. stockpiles and a gas dispute between Russian and
Ukraine that has bolstered European prices.
The price of oil for delivery in February has fallen about
14 percent so far this week, as a string of dismal figures from
major economies stung investor confidence and portended further
weakness in oil demand in months ahead.
"Global oil demand is reducing at an alarming rate," said
Rob Laughlin, senior oil analyst at MF Global in London.
"This latest report from the IEA is another warning shot
across the bows to OPEC that supply is still outpacing demand
and the situation is getting worse seemingly day by day."
"Whilst OPEC is making an effort to adhere to quotas, the
clear picture shows that another cut is required and soon."
In its report, the IEA said Chinese oil demand would grow at
its slowest rate in eight years, rising just 90,000 bpd in 2009
as its GDP growth slows to 6.5 percent.
OPEC, which has already cut 4.2 million bpd in supply from
the world market since September, could quickly deepen output
cuts if needed, OPEC President Botelho de Vasconcelos has said.
[]
Traders said oil could be even weaker if it were not for the
dispute between Russia and Ukraine and the cold wintry weather.
The European Union normally gets a fifth of all its gas from
Russia via Ukraine. The loss of this supply has forced
generators to switch to oil and coal at a time when Europe is
experiencing sub-zero temperatures.
"The gas dispute is beginning to have a major impact on the
market in Europe," said a dealer at one large broker. "It is mid
winter and many power companies can't get their usual fuel."
The European Commission said on Friday Russia and Ukraine
had a last chance this weekend to solve the dispute blocking gas
supplies or risked seeing their relations with the bloc suffer.
Investors were awaiting U.S. CPI data due at 1330 GMT,
expected to show a drop of 0.9 percent in December, while a
preliminary index of January consumer sentiment in January was
expected to erode to 59.0 from 60.1 in December.
(Editing by Anthony Barker)
